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This is episode 32, in which we'll talk a little about money, salaries, and workplace taboos on sharing details about such things.

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How much do you make?

This week we talk about money. Specifically, how do you feel about discussing your salary with your coworkers and peers? Why do you feel the way you do?

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Show Notes / Transcript

I suspect this episode will be both interesting and perhaps somewhat uncomfortable for many listeners. A lot of people have an innate aversion to discussing salary numbers, money, etc. Let's start by examining this, and then move on to look at ways you can maximize what you get in exchange for the value you provide to your employer or customer.

Let's talk salary. I'll start, though since I've been self-employed for a while now, I'm going to cheat a bit and provide a quick story from early on in m career. When I got my first job in the late 90s, when the dot-com bubble was still expanding, I took an offer with a salary of $37,000. The consulting company I was working for was expanding rapidly. I was hired in August; another batch of new hires started in January. In speaking with them, I learned that they had been given offers of$42,000! I was understandably annoyed by this. Here I was, with six months' more experience and already providing value at a billable client and I was making 88% of what these new hires were making on day one.

Let's stop here for a moment. What are you thinking as I relate this story? Did I break some unwritten rules by discussing salary with these new associates of mine? Was it my fault that I was annoyed by this perceived inequality? Maybe you're thinking, "Sure, you just demonstrated why it's a bad idea to talk salary with your coworkers, Steve. All it does is create bad blood and drama." If this is where you're coming from, I'm warning you now that I simply don't understand this position. I'll try to empathize, but at the end of the day I just don't get it, as will become clear in just a moment. If, after hearing the rest of the story, you want to help me understand why you still think keeping salary a secret is better for you, please leave me a note in the comments.

So, why did I want to discuss salary with my coworkers? The answer is simple: I wanted data. I wanted intel. I wanted to be able to make informed decisions about my career. I had aggregate data at my fingertips in the form of annual surveys conducted by my school's career placement office, but I wanted to know what someone in the exact same position at the exact same company was making, and I was able to easily acquire this information by simply striking up a friendly conversation.

Now, given this situation, what would you do? Regardless of whether you would ever actively inquire about salary, let's say your new team member volunteers their salary to you over lunch before you're able to stop them. The cat's out of the bag. You have the information. They're making a significant amount more than you, despite having less experience and having been hired into the same role. I imagine the following options are available:

Do nothing. Forget about it. It's none of your business.

Hold onto the information. Maybe consider it when you next get a pay raise or promotion, and use it to consider whether to ask for more.

Start sending out resumes to other companies who might pay the same or more than what your company is now paying. If you get an offer, maybe your company will match it to keep you.

Go to your manager and demand an increase.

I'm probably leaving out some other options - feel free to add them in the show comments. Back to my story.

After learning I was making \$5k/year less than the batch of new hires, I went to my manager. I explained, respectfully, that I didn't think it was equitable for me to be making significantly less than the folks they'd just hired. My manager very quickly agreed to immediately adjust my salary to match, but asked me not to advertise that he was doing so to my coworkers. I agreed. In hindsight, perhaps I shouldn't have been so quick to agree to this, but at the time it seemed a small price to pay to get the immediate pay increase, and in any case it was just a verbal request, not a legal document I was asked to sign.

So, who won and who lost in this story, if there were in fact any winners or losers? I'm happy with the outcome, since it meant I was able to keep up with the rapidly rising salaries of the time without having to change companies. I really liked where I worked and wasn't contemplating looking elsewhere. If I'd been ambivalent or hostile toward my current employer, I'd likely have taken a different approach. Did the new hires lose anything by sharing information with me? Not that I can tell. Some companies try to enact gag order policies that may go so far as to threaten employees with termination if they share compensation details, but most of these clauses are unenforceable in my experience. I am not a lawyer so do your own research before acting on this opinion, though. In any case, I wasn't asked how I knew what I knew, so no individual was called out as a result my acting on the information I acquired. That leaves my employer. They "lost" in that they now had to pay one more of their employees the same rate they were paying others in the same position. Their profit margin shrunk slightly. But they also won in that they retained a valuable employee who was almost always billing, even while the market grew even tighter for software developers. I stayed there for another 4 years because they continued to grow my compensation and I continued to enjoy working there. If after a year or two I'd found myself underpaid by 20% or more there, I'd very likely have jumped to another position, costing them a highly billable consultant which is how they earned all their revenue.

Could this have gone badly? Perhaps. It's easy to say in hindsight that it was a good move, but what if instead of bumping my pay my manager had fired me for breaking the company's rules about discussing compensation (we didn't have any, but say we did). This was a risk, but I had risk tolerance and I felt the risk likelihood was small. I hadn't yet really expanded my lifestyle and expenses from that of a college student, Iso my expenses were small relative to my income, and I didn't yet have children. The market was also great, and I'm sure if I'd been let go I'd have gotten another offer within a few weeks. Like today in 2018, everybody seemed to be hiring. Would I have made the same choices if unemployment were high, layoffs were going on everywhere, and I didn't know how I'd make ends meet if I lost my job? Maybe not. But I'd still want as much accurate intel as I could get so that I could make the best decision for me given whatever the circumstances.

Let's wrap up by considering who stands to gain from keeping salary details secret. For many listeners I suspect you can't imagine working somewhere that had transparent compensation details, but as a former Army officer I can tell you it's not a big deal. Everybody in the military, and in government service, knows exactly how much everybody else is making. You can check out the pay scale any time you want. It's not an issue. So, it shouldn't be assumed that secret compensation is somehow the only way to do things. It should by now be obvious that the ones who stand to gain the most from keeping salaries secret from one another are the company's owners. By paying different amounts for potentially the same work, they're able to increase profit margins. Pay differences can be warranted, and whether they are or not, they can seed discontent and hurt morale. Or they can empower employees to ask for what they think they're worth, as in my case, which can end up costing the company more in payroll. If companies pay different amounts to different individuals, and this is transparent, they need a way to justify this decision. This can require more communication. Just as it gives the employee more information and freedom to make decisions, it limits the company's freedom to negotiate from a position of having more information than the other party. In negotiations and economics in general, when one party has a better information than another, they can use this to their advantage and get themselves a better deal. By sharing information, employees aren't gaining an unfair advantage, they're merely eliminating an unfair advantage their employer previously held.